The present invention relates to a payment system and method, and more particularly, to a system and method for paying bills using bar code identification.
The current paradigm of the bill payment cycle for goods and services rendered has improved only in incremental steps since the beginning of time. In ancient times, most goods and services were exchanged between individuals, using the common currency of the realm or by a mutually agreed upon barter arrangement. Extension of credit for goods and services was generally limited to the affluent and wealthy. When payment was due, handwritten invoices were hand delivered. Sometime later, cash payment would be remitted in person. Most trade occurred at the local level between individuals, exchanging cash or barter goods.
In the late 1800's and early 1900's in the United States, credit for goods and services rendered remained essentially unchanged at the local level. Society became less stratified and there became an affluent middle class populace between the highest and lowest levels of society. Credit for goods and services became extended to select groups and individuals within this populace as well as the affluent and wealthy. However, invoices were still handwritten tallies of goods and services rendered, which were paid for in cash. The Industrial Revolution precipitated many technology advances in transportation and communication, which affected many facets of daily life. In commerce, the foundation cornerstones of the financial services industry, as it exists today, were developed and shaped. With an infrastructure of a national mail network and a solid central banking system in place, the more affluent and wealthy individuals began to have a larger and more convenient span of financial control with extended remote banking credit services. Merchants could then send their invoices to distant customers through the national mail network and receive payments, some time later, in the form of a bank draft honored by the local bank for cash.
In the generations following World War II to the present time, with general society becoming more and more homogenized and, on the whole more affluent, banking services are available and competitive at every level. Bank checking accounts (and therefore a credit mechanism with which to pay remote billers) are available to 60 percent or more of the population. The national mail network is a very cost-effective delivery system for local and remote customers of automated or machine printed monthly invoice statements, which average 8 billion annually. Customers write checks, as payment for these invoices, and return them via the mail network. When received at the merchant directed return location (a bill payment-processing center), these mail payments are opened, the checks deposited, and the customer accounts credited with the face amount of these check payments.
If everyone were to pay their bills on or before the due date with valid checks, this state of the bill payment industry might be sufficient to satisfy most of today's societal needs. However, this is not the case. Some people never pay their bills on time, for a variety of reasons. Payments made with a check are not always covered with sufficient funds at their bank. The end-result consequence to the biller is a finite cost that is directly attributable to the disruption of the flow of goods and services through his business.
To cover the costs incurred by these late payments, billers have only two options available to them. One option is to spread this overhead cost over of all the goods and services that they provide, with the possible consequence of pricing their products or services out of the competitive price range for similar or substitute set of products and services. The second option is to impose payment penalties on those customers who pay late—for whatever reason. This second option is generally more preferable since it targets the problem population segment directly. However, billers are often unable to recover the full cost of late payment consequences from those customers and still stay within the public legal and regulatory mandates.
Recently, there have been business attempts to further automate the bill payment process by the electronic delivery of biller invoices and the subsequent electronic remittance of payments. While the electronic presentment of bill payments might address the current 15% or so of the U.S. population with access to the Internet, it does not address the 85% without Internet access. Within the next decade, the Internet wired segment of the population will not grow as fast as the current crop of “dot com” entrepreneurs hope or project in their “new” economy business plans. The latest statistics show that less than 3% of the American public may use on-line remittance services.
Federal statistics indicate that fully 30–40% of the U.S. population may be “unbanked”. The “unbanked” population operates solely within the cash economy without any formal banking level traceability. There are many reasons that people prefer to operate in this economy, some of which are culturally related. Others prefer anonymity for quite specific reasons, such as illegal aliens avoiding detection and deportation by the INS or others hiding their sources of income from the IRS. Federal statistics also indicate that 30–40% of the adult U.S. population may have a working fourth grade education or less.
There may be a correlation between those people opting for the cash economy and the fact that many may not be able to maintain and balance a checkbook. Most people would rather admit to being “unbanked” rather than to being illiterate. The “unbanked” segment of the population has difficulty operating in a check-oriented society and paying their monthly bills to remote billers. At the local level, the proprietor-operated check cashing storefronts may service some of the needs of these individuals. Weekly paychecks are cashed for a transaction charge (mostly based on the face value of the check), and money orders are then bought, to be enclosed with mailed bill payments. When bill payments are long past their due date, these individuals may have to resort to more expensive electronic wire services to avoid service disconnects.
For the great majority of printed bill payment invoices that are distributed every month, each biller automates and optimizes its bill collection and remittance process to suit the requirements of its installed paper handling equipment and flavor of customer account numbering assignments and schemes. Bill remittance stub sizes and formats vary from postcards printed with dot matrix printers to full-page 8½″ by 11″ sheets with laser printed invoice information on pre-printed forms. Each has a tear-off bill remittance stub portion that is then mailed back with a check payment. Account numbers on these bill remittance stubs appear in different (and sometime multiple) spatial positions, formats and fonts. While still not universal, most billers have formatted their account numbers (and other customer related information) on bill remittance stubs in Optical Character Recognition (OCR) readable scan lines. Some of this information is printed twice on the bill remittance stub as a contingency that the paper bill remittance stub is shredded or mangled by the automation equipment. Human data entry of this customer account number information is the ultimate fallback mode for processing this payment.
FIG. 1 shows an exemplary local gas company remittance stub 100 utilizing this manner of design. The biller in this example has assigned a numeric account number to each of his customers. As shown in FIG. 1, the customer account number is printed three times, the human readable one 102 under the “Your Account Number” heading, and the other two 103, 104 printed twice in machine-readable form. Account number check digits 101 are used to validate the account number. Each digit in the account number is multiplied by a mathematical weight, and then all these products are added together. Dividing the total sum by 10 and complementing the remainder yields the check digit that is compared against the indicated digit. If the digits match, then the account number has been detected and read correctly. Check digits are employed to eliminate two types of common errors, physical digit read errors and transposition errors (when the customer account number is processed manually).
FIG. 2 shows an exemplary remittance stub 200 from a local power company that assigns a combination of letters and digits to its customer base. There are two forms of the customer account number 201 that appear on the bill remittance stub. The first 201 is designed to be human readable because it appears within a printed text box labeled “Account Number”. The last digit in the Account Number box is the customer account number check digit. The second form of the customer account number 202 appears in machine-readable form and is embedded in the OCR scan line (underlined for illustration). The leading “4” digit is the customer account number check digit and the remainder of the underlined portion of the OCR line are the digits that can be mapped into the human readable “Account Number” form. The format of this machine-readable OCR scan line 202 is probably a confluence of many internal design decisions, based on several factors. From a human ergonomics perspective, a customer service representative of the power company, during a service call, would never ask a customer to recite his account number from a sequence of digits appearing within the machine-readable OCR line and expect a correct answer. The human readable form 201 of the customer account number is easier for a customer to recognize and to dictate over the telephone when requesting service changes to his account.
These two examples illustrate the primary uses of duplicate account information printed on a bill remittance stub—one for simplicity when verbally referring to a specific customer account and the second for the case that the automation process fails and customer account number payment information has to be entered manually.
FIG. 3 shows an exemplary remittance stub 300 from a gas company, in which the biller automates part of the bill payment remittance process by including, on the bill remittance stub, company proprietary bar coded information 301 that does not appear to be related in any way to the printed customer account number. While the format of this bill remittance stub 300 may marginally advance that biller's state-of-the-art bill collection and system processing with the use of newer and improved automation equipment, it does not significantly decrease, in favor of the customer, the overall bill payment cycle. The great majority of the bill payment cycle time consists of non-deterministic time delays in the national mail network during the biller-to-customer and the payment-to-biller delivery paths. These random time delays, combined with very short biller dictated due dates and (possibly intentional) delayed processing times, always work to the detriment of the customer. As a result, some customers are assessed penalty payments, which are sometimes more profitable than the basic goods and services provided.
The system of bill payment invoicing, collection and remittance processing remains a fragmented industry because there are no common bill remittance stub format standards, no common customer account number representation standards, no common, expedient data and money delivery mechanisms to the biller, and no large bill remittance stub processing networks, in addition to payment cycle delays that always work to the detriment of the customer to favor the biller (with a correspondingly greater profit margin). By constructing a common set of standards from the current set of available technology components, a universal national bill payment network could be implemented that addresses the above list of industry problems, resulting in a positive economic impact to the business community at large. For such a set of standards to work, the cooperation of several large organizations would be required; however increases in raw profit and new business growth opportunities should induce such cooperation.
As shown in FIG. 4, a system 400 consistent with the existing bill payment paradigm uses the national mail network and biller payment processing centers to convert physical paper into electronic data and bank credits. The current bill payment network is a paper based network that primarily relies on the central banking system for processing customer remitted bank draft payments and the national mail network for customer invoice delivery and the return of mailed bill payments. In system 400, for all the goods and services rendered to a customer over a given billing period, the biller accounts receivable 401 accumulates a dollar total and generates a detailed machine printed invoice (which may take 4–5 days after account cut-off time to process) that is sent to the customer 403 via U.S. Mail 402. The customer (i.e. payee) 403 typically receives the invoice 2–3 days later (which time is variable, without any direct traceability from the perspective of either the biller or the customer).
Once the customer receives the invoice in the mail, the customer makes out a check payment or procures a money order 404 to remit with a mail payment, which occurs sometime later, depending on the availability of cash resources and other circumstances. The customer mails the payment via U.S. Mail 405 to the biller collection and processing center 406, where processing time may be 2–3 business days or more (which time is variable, without any direct traceability from the perspective of either the biller or the customer). At the bill payment processing center 406, the following operations are typically performed: opening all received mail; microfilming and/or otherwise recording all received payments; electronically reading and processing OCR bill remittance stub information; preparing all received check or money order payments for bank submission; and electronically remitting bill payment data, based on check payment verification. Processing time within the processing center 406 may be 2–3 days.
It should be noted that there may be sanctioned late payment penalties imposed on credit card payments, wherein a biller might gain an advantage by intentionally delaying an on-time payment by a day or so, thereby causing an otherwise on-time payment to be considered late. For example, for a $200 payment delayed by only one day, a $25 late payment penalty might result in an equivalent Annual Percentage Rate (APR) interest rate of 150%, for little or no marginal cost to the biller. This overcharge, which may be difficult for the customer to trace later, may be compounded by another finance charge for the outstanding unpaid balance amount, made late by that intentional delay.
Payment data is next remitted electronically from the processing center 406 to the biller's bank 408, and processing and distribution of electronic payment data is typically done using the Federal Reserve Automated Clearing House (ACH) Network 407, which typically takes 6–9 hours. At the biller's bank 408, the electronic payment data is received from the ACH Network, stripped and reformatted according to biller specified formats, which may take 4–6 hours. Finally, the biller's accounts receivable 401 and/or customer service computer files are updated. Depending on the “legacy factor” of the biller's computer processing systems, this process can range anywhere from 2–3 hours to 4–5 days.
Assuming zero latency on the part of the customer paying his bill, the cycle time between the customer account cut-off time and the time that the customer payment is applied to his account, using the above time estimates, may range from 13–18 days. Since there is usually some customer delay, the observed bill payment cycle time will be longer.